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The Economic Development Commission (EDC) offers a unique and attractive tax incentive program for companies located in the USVI. This is a competitive offshore tax benefit program that the U.S. Government sanctions.
The United States Virgin Islands (USVI) is more than just an ideal tourism destination in the Caribbean with its pristine beaches, wonderful sunshine, great duty-free shopping, and intriguing historic monuments. It is also the ideal location for doing business and maximizing your company’s profits.
The USVI offers a very unique tax incentives program for qualified businesses through the Economic Development Authority and its Economic Development Commission or EDC Program. We encourage global companies in the areas of manufacturing, service businesses, high-technology assembly plants and outsourcing companies such as call centers, as well as, other diverse businesses to qualify for the Economic Development Commission Program.
Our goal is to provide the necessary incentives to make your business expansion or relocation a reality.
By locating your business or qualified portion thereof to the U.S. Virgin Islands, you may be eligible to receive the above-listed tax incentives for your business for a period ranging from 20 to 30 years.
Investors in the U.S. Virgin Islands also enjoy:
The Sustainable Tourism through Arts-based Revenue Stream (STARS) is designed to advertise and promote the U.S. Virgin Islands (USVI) as an ideal location for major and minor film productions and music/audio recording projects. The diverse landscape of the USVI is perfect for the production of motion pictures, documentaries, television programs, commercials, music videos, and magazine advertising. Production companies/studios that corporately establish themselves in the USVI for purposes of long-term production, recording, distribution and/or management may be eligible for 90%-100% tax reductions through the EDC program.
Our latest initiative, the South Shore Trade Zone (SSTZ) Program, is designed to leverage the strategic advantages of the special economic zone on St. Croix. With its 30-foot port drafts, a 10,004-foot airport runway, and more than 30 acres of commercial land, the area offers prime opportunities for businesses. Eligible companies can access tax incentives similar to those provided by the EDC to operate within this special economic zone. This initiative aims to transform St. Croix into a regional transshipment hub by stimulating growth in warehousing, manufacturing, assembly, real estate development, and other industrial sectors.
With miles of pristine coastline and large expanses of land ideal for golf courses, the U.S. Virgin Islands is ripe for hotel and resort development. The Hotel Development Program is designed to assist in the development of new hotels, resorts and other related tourism facilities in the U.S. Virgin Islands. It allows hotel developers to use a portion of their hotel occupancy and casino taxes to repay long-term loans, which can help in obtaining financing for projects
The program allows for the use of future gains in hotel room occupancy taxes and casino taxes to assist in the development areas which would not happen solely through private investment in the reasonably foreseeable future. Revenues generated from the Hotel Development and Finance Program are directed into dedicated trust funds established for each approved project. These funds, sourced from hotel and casino taxes generated by the approved project, are allocated and deposited into the respective hotel development and finance trust fund.
Revitalizing Historic Towns:
The Enterprise Zone Commission (EZC) offers a unique and attractive tax incentive program for companies located in our historic towns. The EZC’s mandate is to revitalize once vital, vibrant communities now considered distressed. In achieving this objective within the Territory, the EZC seeks to provide appropriate investments, tax benefits, and regulatory relief of sufficient importance to encourage the business community to commit financially.
Authorizing Act Tax Incentives:
The authorizing act provides tax incentives and economic development benefits free from regulatory barriers that inhibit economic growth and encourages collaboration among public, private, and non-profit entities to accomplish the desired objectives.
Designated Enterprise Zones
The designated enterprise zones are Savanne-Downstreet, Garden Street-Up Street on St. Thomas, and the towns of Christiansted and Frederiksted on St. Croix.
Tax Increment Financing (TIF) is a technique used by the USVI government to finance development or redevelopment activities by capturing the future tax revenue benefits of real estate improvement to pay the present costs of public improvements.
TIF capitalizes a predetermined portion of the real property and gross receipts taxes to finance the necessary public infrastructure component of a TIF project. Tax-exempt bonds secured by that tax revenue fund the necessary highways, roads, traffic lights, storm drainage, sewer, streetlights, and various other public infrastructure that otherwise overburden budgets and make costs of development prohibitive. Upon payment of public infrastructure improvements, 100% of the new gross receipts tax revenue and real property tax revenue revert to the government.
Tax Increment Financing may be used to finance a variety of costs and improvements on public infrastructure, land acquisition, demolition, utilities, and projects such as Sewer expansion and repair, Water supply, Street construction, Affordable/low-income housing, Libraries and schools, Traffic control, Park improvements, Parking structure, and Utility lines.
What is a 1031 Exchange? Simply stated, it is a way for owners of investment real estate to buy and sell the property and defer payment of any capital gains taxes by reinvesting their money in other “like-kind” property. These transactions are known as deferred exchanges or 1031 Exchanges. “Like-kind” is a bit of a misnomer in that it can really be any type of real estate held for business or investment purposes; so, for example, an apartment building could be exchanged for a vacation villa or a beachfront lot. The key is that these code provisions relate to the sale and purchase of properties held primarily for business or investment. Section 1.1031 of the IRS Code lays out in detail the procedure for turning a sale and purchase transaction into a qualified 1031 exchange thereby deferring your capital gains tax obligations. The good news is that the provisions of this IRS code apply to the U. S. Virgin Islands.
Essential Elements of a 1031 Exchange One of the rules is that you are not allowed to receive or touch any of the money from the sale of your relinquished property. Instead, the rules require that a “safe harbor” or Qualified Intermediary receive, hold, and safeguard the proceeds of the sale until the exchange is completed. There are bonded companies that specialize in accommodating 1031 Exchanges.
The rules also require that certain time limits must be adhered to. You can identify up to three possible “replacement” properties in which to invest but must do so within 45 days of the close of escrow on the first property. The ultimate acquisition of the replacement property must be completed within 180 days. To defer all tax obligations, you must reinvest 100% of the sale proceeds (including any amounts used to pay off existing loans) into a “like-kind” property or properties of equal or greater value than the property you sold.
The above outlines only the most basic elements of an exchange. While the rules in practice are quite simple to follow, you need expert advice to ensure that you are following all of the rules and therefore benefiting from the 1031 tax savings provisions. Get the advice of your attorney or tax consultant in selecting a Qualified Intermediary. Their fees vary and their methods for holding the exchange proceeds differ. It is also important to know if the Qualified Intermediary will be investing the funds and in what type of investments
It receives a 10% reduction in federal capital gains tax if it holds the investment in the tax break zone for at least five years and an additional five percent reduction if it holds the investment for at least seven years.
It avoids federal capital gains tax altogether on any further appreciation of its investment in the tax break zone. That is if the company ultimately sells its investment in the tax break zone for $35 million after seven years – a gain of $25 million – it will defer capital gains tax on the original $10 million gain until the date of the sale, reduce the amount of that capital gain by 15 percent, and pay no capital gains tax at all on the $15 million appreciated gain.
There is a long history of Congress encouraging the territories to try to spur development with tax breaks. These new tax breaks join the 90 to 100 percent breaks on corporate income tax, gross receipts tax, property tax and excise tax the territory gives through the Economic Development Commission and through the University of the Virgin Islands Research and Technology Park.
In 2016, Mapp proposed a plan to boost the economy over five years, which relied heavily on hopes of massive growth in the number of entities taking advantage of the territory’s tax break programs. The U.S. Virgin Islands were among 18 states and territories approved in what the Treasury Department termed the “first round” of approved tax break zones. The others were: American Samoa; Arizona; California; Colorado; Georgia; Idaho; Kentucky; Michigan; Mississippi; Nebraska; New Jersey; Oklahoma; Puerto Rico; South Carolina; South Dakota; Vermont; and Wisconsin.
We encourage you to peruse this site for additional information on qualifying and applying for benefits under our program, and we look forward to serving you!
